The New York Times: Belarus Economic Crisis Deepens as Currency Plunges

An economic crisis in Belarus deepened Wednesday when its currency plunged in value after the Central Bank lifted restrictions on the exchange rate.

The rule change, and a subsequent drop in the value of the ruble, had been anticipated. But the speed of the currency’s collapse — by about 25 percent against the dollar in one day — jarred nerves and sent a ripple through European markets, though a small one. Belarus’s eccentric politics have largely isolated the country economically.

“Clearly, the earlier they would have done this the better, without the needless loss in reserves,” Yaroslav Lissovolik, the chief economist for the Commonwealth of Independent States at Deutsche Bank in Moscow, said in an interview.

Long lines had been snaking out of banks and exchange booths for the past month, as people wanting to change rubles for dollars before the end of the artificially propped-up official rate waited days or even weeks to reach the counters. (They could hold a spot with a daily appearance until they neared the front; then they had to stay in place for 24 hours or so lest they miss their turn.)

The official exchange rate had been one of the many Soviet-style rules kept in place by the authoritarian president, Aleksandr G. Lukashenko. It had, for a time, staved off some of the more jarring economic ups and downs of other weak economies in the former Soviet Union, but at the price of swiftly diminishing Belarus’s foreign currency reserves.

The bank controls meant that companies importing consumer goods had to wait days or weeks for a transaction, so imported goods began to disappear from shelves, and consumers hoarded staples like sugar and oil. That caused the kind of inflation and shortages common in distressed former Soviet economies. Mr. Lukashenko has tried to blame unspecified foreign governments for the problem, while trying to smooth the expected decline in a series of reforms to liberalize currency trading.

The situation poses a political challenge for Mr. Lukashenko, who for years has cast himself as a leader who could keep the economy on an even keel by retaining the collective farm system and broad state ownership of industry, if not produce much growth.

Economists said that the plunge in the currency’s value could bring inflation and escalate social tensions, already strained by a contentious election last year and a terrorist attack this spring.

Over a longer time frame, it should help bolster exporters, including dairy farms and factories making tractors and trucks for the mining industry.

Belarus, of course, is hardly alone in Europe in being buffeted by the global recession. Greece, Ireland and Portugal are struggling to roll over government bonds, for example.

But Belarus’s economic woes are distinct because Mr. Lukashenko has so alienated the rest of Europe with his authoritarian politics that a coordinated bailout from Western governments seems unlikely, deepening the sense of panic in the population.

Russia has offered a $3 billion loan from a regional development fund that includes donations from Kazakhstan. The Russian finance minister, Aleksei L. Kudrin, said Wednesday that a decision on this loan was most likely to come this week.

A survey of currency display boards at five banks in the capital, Minsk, by Bloomberg on Wednesday afternoon showed an average exchange rate of 3,991 Belarussian rubles to the dollar, 23 percent below the Central Bank-established rate of 3,037 rubles to the dollar.